Touchtone Grp., LLC v. Rink

Decision Date21 December 2012
Docket NumberCivil Action No. 11–cv–02971–WYD–KMT.
CourtU.S. District Court — District of Colorado
PartiesTOUCHTONE GROUP, LLC on behalf of itself and all others similarly situated, Plaintiff, v. Daniel J. RINK; Tatum, LLC; Christopher Flannery; Astor, Weiss, Kaplan & Mandel LLP; Estill & Long, LLC; Steven Granoff, CPA; Krassenstein, Granoff & Unger, LLC; Carbon Diversion, Inc.; Tracs Growth Investment; and Jon Does 1–110, Defendant.

OPINION TEXT STARTS HERE

Anthony Darrow Shapiro, Karl P. Barth, Hagens Berman Sobol Shapiro, LLP, Seattle, WA, Leif Garrison, Hagens Berman Sobol Shapiro, LLP, Colorado Springs, CO, Patrick Howard, Simon B. Paris, Saltz Mongeluzzi Barrett & Bendesky, P.C., Philadelphia, PA, for Plaintiff.

Scott Mark Browning, Tamara F. Goodlette, Rothgerber Johnson & Lyons, LLP, Denver, CO, for Defendant, Daniel J. Rink.

Michael Constantine Marsh, Ryan Alan Roman, Akerman Senterfitt, LLC, Miami, FL, Victoria Elena Edwards, Akerman Senterfitt LLP, Denver, CO, for Defendant, Tatum, LLC.

Robert James Zavaglia, Jr., Treece Alfrey Musat, P.C., Denver, CO, for Defendant, Christopher Flannery.

Carolyn J. Fairless, Wheeler Trigg O'Donnell, LLP, Denver, CO, for Defendants, Christopher Flannery, and Astor, Weiss, Kaplan, & Mandel LLP.

Michael T. McConnell, Robert W. Steinmetz, Mcconnell Fleischner Houghtaling, LLC, Denver, CO, for Defendant, Estill & Long, LLC.

Alan S. Fellheimer, John Joseph Jacko, III, Fellheimer & Eichen LLP, Philadelphia, PA, for Defendant, Steven Granoff CPA.

Benjamin Joseph Larson, Kelley B. Duke, Mark E. Haynes, Ireland Stapleton Pryor & Pascoe, P.C., Denver, CO, for Defendants, Steven Granoff CPA and Krassenstein, Granoff & Unger, LLC.

Richard C. Cornish, Attorney at Law, Greenwood Village, CO, for Defendants, Carbon Diversion, Inc. and Tracs Growth Investment and John Does 1–100.

ORDER

WILEY Y. DANIEL, Chief Judge.

I. INTRODUCTION

THIS MATTER is before the Court on several motions to dismiss filed by Defendants. This is a class action brought under federal and state securities laws to recover damages resulting from a Ponzi scheme orchestrated by an entity known as Mantria Corporation (“Mantria”). In the Complaint, Plaintiff Touchstone alleges that Defendants materially participated in Mantria's scheme to defraud investors comprising Plaintiff's class. Defendants argue that Plaintiff has failed to state a valid claim for relief, and several of the defendants argue that they should be dismissed for lack of personal jurisdiction.

II. RELEVANT FACTUAL BACKGROUND

Plaintiff alleges that the defendants materially participated in Mantria's Ponzi scheme directly or through their agents while ostensibly providing professional services for Mantria. In 2007, Mantria contracted with Defendant Tatum, LLC (Tatum) to have Defendant Rink act as Mantria's interim CFO. Tatum is a consulting firm that acts as a headhunter for companies seeking interim executive and financial officers. Plaintiff alleges that at all times relevant to this action, Rink was a consultant to Mantria and remained an employee or agent of Tatum. Compl., at ¶¶ 69–73.

In 2008, Defendant Granoff was named Mantria's controller while remaining a partner of Krassenstein, Granoff & Unger. As Mantria's controller, Granoff worked with and reported directly to CFO Rink.

In 2009, Defendant Flannery became Mantria's Chief Legal Officer and General Counsel. At that time, Defendant Flannery remained employed by Defendant Astor Weiss.

Finally, Estill & Long was the law firm for Speed of Wealth, a company that advertised investment opportunities with Mantria.

On August 5, 2011, Judge Christine M. Arguello entered summary judgment against Mantria for various violations of securities laws. SEC v. Mantria Corp., et al., No 09–cv–02676 (D.Colo. Mar. 15, 2011).

Plaintiff alleges that while Defendants Rink, Granoff, and Flannery worked for Mantria, they made materially false statements to investors, otherwise aided Mantria in defrauding its investors, received fraudulently transferred assets from Mantria, and were, thereby, unjustly enriched. Plaintiff alleges that Defendants Tatum, Krassenstein, and Astor Weiss are liable for these acts based on their agency relationship with the individual defendants. Finally, Plaintiff alleges that Estill & Long also aided in Mantria's fraud and were unjustly enriched as a result of receiving fraudulently transferred funds from Mantria.

III. ANALYSISA. Whether the Court Has Personal Jurisdiction Over the Defendants

1. Standard of Review

A plaintiff has the burden of showing that jurisdiction is appropriate. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1069 (10th Cir.2008). However, [w]here a district court considers a pre-trial motion to dismiss for lack of personal jurisdiction without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction to defeat the motion.” AST Sports Sci., Inc. v. CLF Distrib., Ltd., 514 F.3d 1054, 1056 (10th Cir.2008). In other words, the plaintiff need only present facts that, if true, would support jurisdiction over the defendant. Id. The court will resolve all factual disputes in favor of the plaintiff when determining whether personal jurisdiction is established. Id.

My jurisdictional analysis is somewhat unusual in this case because Defendants Rink, Granoff, and Flannery are being sued under the Federal Securities Exchange Act, which provides for nationwide service of process. 1 As explained more fully below, personal jurisdiction analysis is less exacting where a defendant is sued under a statute providing for nationwide service of process. See, e.g., Peay v. BellSouth Med. Assistance Plan, 205 F.3d 1206, 1212–13 (10th Cir.2000); SEC v. Knowles, 87 F.3d 413, 417 (10th Cir.1996). Thus, I apply relatively liberal jurisdictional analysis to the defendants being sued under the Securities Exchange Act.

However, it would be improper to apply this unique standard if Plaintiff failed to state a valid claim for relief under the Act, since it is the Act's provision of nationwide service of process that warrants application of a unique jurisdictional analysis in the first place. Thus, though I address the issue of personal jurisdiction first, my jurisdictional analysis turns in part on my subsequent determination of whether Plaintiff has stated a claim for relief under the Act against Defendants Rink, Flannery, or Granoff. Below, I find that Plaintiff states a valid claim for relief under the Act against Defendants Rink and Flannery, but not against Defendant Granoff. Accordingly, in addressing Rink and Flannery's jurisdictional arguments, I apply the unique jurisdictional standard for claims brought under statutes that provide for nationwide service of process. In contrast, I apply the International Shoe's traditional “minimum contacts” analysis to Defendant Granoff as well as the rest of the defendants pleading dismissal for lack of personal jurisdiction. I mention it here so that the reader is not confused why I first conclude that the Court lacks jurisdiction over Granoff and then evaluate whether Plaintiff has stated a federal securities law claim against Granoff.

2. Whether the Court Possesses Personal Jurisdiction Over Defendants Rink and Flannery
i. Legal Standard

“When the personal jurisdiction of a federal court is invoked based upon a federal statute providing for nationwide or worldwide service, the relevant inquiry is whether the respondent has had sufficient minimum contacts with the United States.” Knowles, 87 F.3d at 417. “Specific contacts with the district in which enforcement is sought, in this case Colorado, are unnecessary.” Id. Rather, where jurisdiction is invoked based on nationwide service of process, the law requires only that the plaintiff's choice of forum “be fair and reasonable to the defendant such that the court's exercise of jurisdiction comports with the Fifth Amendment's guarantee of due process. Peay, 205 F.3d at 1212.

Under this analysis, [t]he burden is on the defendant to show that the exercise of jurisdiction in the chosen forum will ‘make litigation so gravely difficult and inconvenient that [he] unfairly is at a severe disadvantage in comparison to his opponent.’ Id. The Tenth Circuit has recognized that “in this age of instant communication and modern transportation, the burdens of litigating in a distant form have lessened.” Id. at 1213. Accordingly, “it is only in highly unusual cases that inconvenience will rise to a level of constitutional concern.” Id. at 1212.

The Tenth Circuit has set forth several factors to consider when assessing whether a defendant has met it's burden “of establishing constitutionally significant inconvenience”: (1) the extent of the defendant's contacts with the place where the action was filed; (2) the inconvenience to the defendant of having to defend in a jurisdiction other than that of his residence or place of business, including (a) the nature and extent and interstate character of the defendant's business, (b) the defendant's access to counsel, and (c) the distance from the defendant to the place where the action was brought; (3) judicial economy; (4) the probable situs of the discovery proceedings and the extent to which the discovery proceedings will take place outside the state of the defendant's residence or place of business; and (5) the nature of the regulated activity in question and the extent of impact that the defendant's activities have beyond the borders of his state of residence or business. Id. at 1212. I emphasize that specific contacts with the forum district is not required to establish personal jurisdiction, even though it is a relevant factor to consider. Knowles, 87 F.3d at 417;CGC Holding Co., LLC v. Hutchens, 824 F.Supp.2d 1193, 1204 (D.Colo.2011) ([T]he Peay analysis does not require ‘minimum contacts' with Colorado as such.... Rather, this is one factor to consider ...”).

ii. Analysis

Defendants Rink and Flannery argue...

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