Warren v. Bokum Resources Corp., Civ. No. 76-664.

• Decision Date: 25 July 1977
• Docket Number: Civ. No. 76-664.
• Parties: C. J. WARREN, C. J. Warren Company, a New Mexico Partnership, and Victor Salazar, Plaintiffs, v. BOKUM RESOURCES CORPORATION, Richard D. Bokum, II, William E. Biava, William A. Buchecker, and I. Howard Wardlaw, Individually and as directors and officers of Bokum Resources Corporation, Peter F. F. Kissel, Louis Starr, and Louis H. Diamond, Individually and as directors of Bokum Resources Corporation, Beverly D. Roy, Individually and as an officer of Bokum Resources Corporation, Marjorie S. Deane and Riley Gilley, Individually and as trustees of a trust for the benefit of the children of Marjorie and Disque Deane, and Llennoco Corporation, Defendants.
• Court: U.S. District Court — District of New Mexico

433 F. Supp. 1360

C. J. WARREN, C. J. Warren Company, a New Mexico Partnership, and Victor Salazar, Plaintiffs, v. BOKUM RESOURCES CORPORATION, Richard D. Bokum, II, William E. Biava, William A. Buchecker, and I. Howard Wardlaw, Individually and as directors and officers of Bokum Resources Corporation, Peter F. F. Kissel, Louis Starr, and Louis H. Diamond, Individually and as directors of Bokum Resources Corporation, Beverly D. Roy, Individually and as an officer of Bokum Resources Corporation, Marjorie S. Deane and Riley Gilley, Individually and as trustees of a trust for the benefit of the children of Marjorie and Disque Deane, and Llennoco Corporation, Defendants.

Civ. No. 76-664.

United States District Court, D. New Mexico.

July 25, 1977.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Howard F. Houk, Albuquerque, N. M., Hobbs & Waldbaum, P. C., Larry F. Hobbs, Leonard N. Waldbaum and Douglas B. Koff, Denver, Colo., for plaintiffs.

Marchiondo & Berry, P. A., Zenon F. Myszkowski, Albuquerque, N. M., for defendants.

Lawler, Kent & Eisenberg, Philip N. Smith, Jr., Washington, D. C., and Adams & Foley, Quincy D. Adams, Albuquerque, N. M., for Louis H. Diamond, individually, and as Director of Bokum Resources Corp.

Rodey, Dickason, Sloan, Akin & Robb, P.A., John P. Burton, Albuquerque, N. M., for Llennoco Corp.

MEMORANDUM OPINION

BRATTON, District Judge.

This matter coming on for consideration before the Court upon the Motions of defendants Llennoco Corporation and Bokum Resources Corporation, et al., to dismiss, and the Court having considered the memoranda together with the pleadings, affidavits and the entire file in this cause, it is concluded that the Motions are not well taken and will be denied.

While Llennoco Corporation joins and incorporates by reference the Motion of the other defendants to dismiss pursuant to Rule 12(b)(6), Fed.R.Civ.P., the main thrust of its argument is that Llennoco Corporation does not have sufficient contacts with New Mexico to justify personal jurisdiction over this defendant on any claims via extra-territorial service of process, and for the same reasons, that venue is not properly laid in New Mexico.

The causes of action set out in the Complaint are based on acts of the defendants alleged to constitute violations of §§ 10(b) and 14(e) of the Securities Exchange Act of 1934, Rules 10b-5 and 10b-13 promulgated pursuant to the 1934 Act, New Mexico state securities law and the common law. Venue in a civil suit brought under the 1934 Act is determined in accordance with § 27 of that Act, 15 U.S.C. § 78aa. Such action may be brought in the district where any act or transaction which constitutes the alleged violation occurred or in any district where the defendant is found or transacts business. In addition, service may be had upon the defendant in any district where he is an inhabitant or may be found. Accordingly, venue as to Llennoco Corporation for claims brought under the 1934 Act will lie in New Mexico if the acts or transactions complained of took place in this district. If venue is properly laid in New Mexico, valid process may be had on Llennoco "in any other district of which the defendant is an inhabitant or wherever the defendant may be found" under the terms of 15 U.S.C. § 78aa.

Plaintiffs have alleged in their Complaint that defendant Bokum Resources Corporation sent by mail, and plaintiffs received in New Mexico, a Tender Offer, and Exchange Offer, and various offers to renew and extend the Tender Offer and Exchange Offer. It is also alleged that the Bokum Resources Corporation has its principal place of business in Santa Fe, New Mexico, and that "the acts and transactions complained of herein have taken place in this district." Such contacts with and activities within the forum are clearly adequate to establish venue for this action in the District of New Mexico.

Other courts have found venue to be established for purposes of the 1934 Act where there have occurred far fewer acts within the forum state than are alleged here. It has been held that there need only be one act within the district for purposes of the 1934 Act, so long as that act is more than an immaterial part of the alleged violation. Sohns v. Dahl, 392 F.Supp. 1208, 1215 (W.D.Va.1975) and cases cited therein; 3 A. Bromberg, Securities Law: Fraud, Sec. 11.3, p. 247 at n.11 (1974). These authorities suggest that the mere receipt by plaintiffs in New Mexico of the defendants' communications regarding the Tender and Exchange Offers is sufficient activity within the district to satisfy the venue requirements of § 27, as this amounted to "an important step in the execution and consummation of the alleged fraudulent scheme." Zorn v. Anderson, 263 F.Supp. 745, 748 (S.D.N.Y.1966); see Stern v. Gobeloff, 332 F.Supp. 909, 911 (D.Md.1971); Schneider v. Sears, 265 F.Supp. 257, 262 & n.14 (S.D.N.Y.1967).

Llennoco states by affidavit of its president, Walter F. O'Connell, that it does no business in New Mexico, has no contacts with New Mexico and has not engaged in any activity in New Mexico. It is clear, however, that for purposes of venue for claims brought under the Act, it is not necessary that each defendant named have engaged in acts or transactions within the forum district.

"Venue under the Exchange Act is proper if one act in furtherance of the unlawful scheme is done in the forum district. This does not require that each defendant perform such an act; sufficient is an act of which all the defendants were the intended beneficiaries and a part of the fraudulent scheme. See Clapp v. Stearns & Co., 229 F.Supp. 305 (S.D.N.Y.1964); Dauphin Corp. v. Redwall Corp., 201 F.Supp. 466 (D.Dela.1962); Hooper v. Mountain States Securities Corp., 282 F.2d 195 (5th Cir. 1960), cert. denied, 365 U.S. 814, 81 S.Ct. 695, 5 L.Ed.2d 693 (1961); Wharton v. Roth, 263 F.Supp. 922 (E.D.N.Y.1964)."

Zorn v. Anderson, supra, 263 F.Supp. at 748; see Sohns v. Dahl, 392 F.Supp. 1208, 1214-5 (W.D.Va.1975); Fogel v. Wolfgang, 48 F.R.D. 286, 289 (S.D.N.Y.1969).

Given the extraterritorial service of process provision in § 27, it is evident that so long as venue is properly laid in the forum district for claims brought under the 1934 Act, it is not necessary that each defendant have personally engaged in acts or transactions within the forum in order to sustain personal jurisdiction over him. In the case of Mitchell v. Texas Gulf Sulphur Company, 446 F.2d 90 (10th Cir. 1971), cert. denied, 404 U.S. 1004, 92 S.Ct. 564, 30 L.Ed.2d 558 (1971), an individual defendant raised objections to personal jurisdiction and venue similar to those raised by Llennoco Corporation in the present Motion, claiming that the court lacked personal jurisdiction over him because he had never been an inhabitant of the forum district, was not found there and transacted no business there. The Court of Appeals ruled that where the acts and transactions which formed the basis for claims brought under the 1934 Act had occurred within the forum district, the objecting defendant was properly before the court. 446 F.2d at 106. See also Sohns v. Dahl, supra, 392 F.Supp. at 1218 (since venue properly lay in the forum district under § 27 of the 1934 Act, court had in personam jurisdiction over defendant who was served out of state and who was not a resident, did no business in and had no contact with the forum district); Stern v. Gobeloff, 332 F.Supp. 909, 911-914 (D.Md. 1971) (International Shoe "minimum contacts" theory normally inapplicable where jurisdiction and venue based on and authorized by Securities Acts of 1933 and 1934; in personam jurisdiction of forum sustained where venue is satisfied and service is made in distant districts of which defendants are inhabitants or where they are found), but see Oxford First Corp. v. PNC Liquidating Corp., 372 F.Supp. 191 (E.D.Pa.1974); Clapp v. Stearns & Co., 229 F.Supp. 305, 307 (S.D. N.Y.1964) (Service of process in Kansas on Kansas corporate defendant gave New York court jurisdiction over such defendant where venue provision of 1934 Act was satisfied by a telephone call, which was part of the alleged violation of the Act, made in New York by a defendant other than the Kansas corporate defendant).

While the venue requirement of § 27 is satisfied and personal jurisdiction may properly be exercised over Llennoco Corporation with respect to claims brought under the 1934 Act¹ an issue remains whether personal jurisdiction over Llennoco Corporation also exists as to the pendent claims. There is a split in authorities on this issue, the older cases tending toward the view that service as to related claims under the nationwide service provisions of the Securities Exchange Act is not permitted. Courts taking this position have reasoned that Congress has not explicitly provided for such service and that implied extensions of statutes authorizing service of process are discouraged. See, e. g. Trussel v. United Underwriters Ltd., 236 F.Supp. 801 (D.Colo.1964), and cases cited at Bertozzi v. King Louie International, Inc., 420 F.Supp. 1166, 1171-2, n.1 (D.R.I.1976). More recent cases by contrast, appear to take the view that such service is permissible, reasoning that such approach is supported by the policy considerations which underlie the judicially created doctrine of pendent jurisdiction: judicial economy, convenience and fairness to litigants. See, e. g., Robinson v. Penn Central Co., 484 F.2d 553 (3rd Cir. 1973); Bertozzi v. King Louie International, Inc., supra at 1172, and cases cited at n.2 therein. See also 2 Moore, Federal Practice, ¶ 4.421 at 1293.11-12; 4 Wright & Miller, Federal Practice & Procedure: Civil § 1125 at 528-529. The latter cases and authorities are persuasive, and they appear to

"state the better view, one which serves both the purposes of the substantive federal statutory scheme and the practical considerations of judicial economy underlying the concept of pendent jurisdiction without

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