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St. Ventures, LLC v. Kba Assets and Aquisitions

April 23, 2013


The opinion of the court was delivered by: Lawrence J. O'Neill United States District Judge


Judges in the Eastern District of California carry the heaviest caseload in the nation, and this Court is unable to devote inordinate time and resources to individual cases and matters. This Court cannot address all arguments, evidence and matters raised by parties and addresses only the arguments, evidence and matters necessary to reach the decision in this order given the shortage of district judges and staff. The parties and counsel are encouraged to contact the offices of United States Senators Feinstein and Boxer to address this Court‟s inability to accommodate the parties and this action. The parties are required to consider consent to a Magistrate Judge to conduct all further proceedings in that the Magistrate Judges‟ availability is far more realistic and accommodating to parties than that of U.S. District Judge Lawrence J. O‟Neill who must prioritize criminal and older civil cases.


On June 27, 2012, plaintiff St. Ventures, LLC ("St. Ventures") filed suit against defendants KBA Assets and Acquisitions, LLC ("KBA"), Ben Penfield ("Mr. Penfield"), Asset Placement Limited, ("APL"), Susan Gillis ("Ms. Gillis"), Paul Windwood ("Mr. Windwood"), and nominal defendant Bank of America, N.A. ("Bank of America"). The gravamen of St. Ventures‟ complaint is that defendants obtained a bond owned by St. Ventures through fraudulent means. Now before the Court is APL‟s motion to dismiss St. Ventures‟ complaint for lack of personal jurisdiction, improper service, improper venue, and failure to state a claim. St. Ventures opposes the motion. For the reasons discussed below, this Court DENIES APL‟s motion.


I. Facts*fn1

St. Ventures owns a collateralized mortgage obligation*fn2 with an original face value of $1,000,000,000 ("bond"). The bond provides a coupon payment of approximately $10,000 per month. Nominal defendant Bank of America is the current trustee.

In November 2010, Ms. Gillis, on behalf of APL, contacted St. Ventures with a business proposition. Ms. Gillis explained that as a foreign company based in the United Kingdom APL was able to enter into a transaction not allowed in the United States. The transaction involved St. Ventures allowing a third party to use the bond as collateral on a line of credit for a period of time and in exchange the third party would pay a fee for use of the bond. Logistically, the bond would be put into a joint account, which APL would control, until the fee was paid. Then the bond would be transferred to the third party for an expressed period of time. Ms. Gillis assured St. Ventures that title to the bond would not change even after the bond was transferred. Ms. Gillis explained that the fee for use of the bond would be greater than the bond‟s current income stream. APL would find someone willing to pay for the limited use of the bond and then APL and St. Ventures would split the fee paid by the third party. Ms. Gillis repeatedly assured St. Ventures that the transaction was secure and carried little risk. Ms. Gillis further promised that she and APL would replace the bond if anything went wrong.

St. Ventures agreed to the transaction and APL allegedly located a third party willing to pay for the limited use of the bond. When the third party failed to pay the agreed upon fee, APL transferred the bond back to St. Ventures and indicated that it would look for another party. In July 2011, Mr. Windwood, APL‟s Director of Finance, located KBA and Mr. Penfield for the transaction.

On August 9, 2011, APL entered into an agreement with KBA in which KBA promised to pay APL $5,000,000 for use of the bond as collateral for a period of 13 months. Under the agreement $3,000,000 was to be paid to St. Ventures and the remaining $2,000,000 would be put into a private placement program with the proceeds to be split between KBA and APL. On August 15, 2011, St. Ventures and APL entered into an agreement in which APL promised to pay St. Ventures $3,000,000 in exchange for ownership of the bond. The parties agreed that St. Ventures could terminate the contract if APL failed to make the first payment on time and that upon such a request APL would return the bond to St. Ventures within 10 banking days.

In accordance with the agreement, St. Ventures transferred the bond but never received the promised payment. When St. Ventures questioned APL regarding payment, APL assured St. Ventures that the funds would be delivered as promised. On September 21, 2011, St. Ventures formally terminated its agreement with APL and demanded that the bond be returned. APL continued to give assurances and excuses but did not make any payments and did not return the bond. St. Ventures formally demanded return of the bond again on November 23, 2011, without success. St. Ventures also contacted Mr. Penfield directly. Mr. Penfield acknowledged receipt of the bond and claimed that KBA paid APL all that was due under their agreement. Ms. Gillis denied receiving funds from KBA or Mr. Penfield.

II. Procedural History

On June 27, 2012, St. Ventures filed a complaint with this Court in which it alleged twelve causes of action. (Doc. 1). St. Ventures alleges the following causes of action against KBA, Mr. Penfield, APL, Ms. Gillis, and Mr. Windwood: (1) fraud; (2) recovery of specific property; (3) conversion; (4) negligent representation; (5) accounting; (6) unjust enrichment; (7) money had and received; and (8) declaratory relief. In addition, it alleges a breach of contract claim and seeks relief based on rescission against APL, Ms. Gillis, and Mr. Windwood. St. Ventures also alleges a breach of contract and third party beneficiary claim against KBA and Mr. Penfield. Finally, St. Ventures seeks injunctive relief against all defendants.

On July 3, 2012, St. Ventures requested a preliminary injunction restraining and enjoining defendants from selling, transferring, liquidating, encumbering, spending, depleting, or otherwise dissipating the bond and any portion of the coupon payments from the bond, or any assets purchased with these funds. (Doc. 9). On August 23, 2012, this Court granted St. Ventures‟ request. (Doc. 19).

Now before the Court is APL‟s motion to dismiss. (Doc. 35). APL seeks to dismiss this action for lack of personal jurisdiction, improper service, improper venue, and failure to state a claim. St. Ventures opposes the motion. (Doc. 41). APL filed its motion on March 15, 2013, and set the hearing on March 27, 2013, in violation of Local Rule 230(b) and this Court‟s Standing Order.*fn3 (Id.). On March 18, 2013, this Court found the motion suitable for a decision without oral argument, pursuant to Local Rule 230(g), and vacated the March 27, 2013, hearing date. (Doc. 38). The Court also set a briefing schedule and ordered APL to show cause as to why this Court should not impose sanctions for APL‟s failure to comply with the local rules and this Court‟s Standing Order. (Id.). In response, APL explained that its mistakes were unintentional and inadvertent. (Doc. 40). This Court discharges the order to show cause and admonishes APL to familiarize itself with this Court‟s Local Rules and Standing Order and to use care when filing documents with this Court.


I. Personal Jurisdiction

A. Legal Standard

FED. R. CIV. P. 12(b)(2) allows a defendant to challenge a complaint "for lack of jurisdiction over the person" as a threshold issue. A district court‟s determination regarding personal jurisdiction is a question of law. Rio Prop., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). Although defendant is the moving party on the motion to dismiss, plaintiff is the party who invoked the court‟s jurisdiction. Therefore, plaintiff bears the burden of proof on the necessary jurisdictional facts. Id.

When defendant‟s motion to dismiss is made as its initial response and the court decides the motion without conducting an evidentiary hearing, plaintiff need only make a prima facie showing that personal jurisdiction exists. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). A "prima facie" showing means that plaintiff has produced admissible evidence which, if believed, would be sufficient to establish the existence of personal jurisdiction. See Harris Rutsky & Co. Ins. Serv., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003). The complaint‟s uncontroverted factual allegations must be accepted as true, and any factual conflicts in the parties‟ declarations must be resolved in plaintiff‟s favor. Id. To defeat plaintiff‟s prima facie showing of jurisdiction on a FED. R. CIV. P. 12(b)(2) motion, defendants must demonstrate the presence of other considerations that would render personal jurisdiction unreasonable. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998).

The Court considers both state and federal law in a personal jurisdiction challenge. California‟s long-arm statute authorizes the exercise of personal jurisdiction on any basis not inconsistent with the state or federal constitution. CAL. CIV. PROC. CODE § 410.10. As to federal law, "[e]xercise of in personam jurisdiction over an out-of-state defendant is limited by the Due Process Clause of the Fourteenth Amendment." Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1168-69 (9th Cir. 2006) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-14 (1984)). Based on considerations of Due Process and California's long-arm statute, two recognized bases exist for personal jurisdiction over nonresident defendants: (1) "general jurisdiction" which arises when a defendant‟s contacts with the forum state are so pervasive as to justify the exercise of jurisdiction over the person in all matters; and (2) "specific" or "limited" jurisdiction which arises out of the defendant's contacts with the forum giving rise to the subject of the litigation. Helicopteros Nacionales, 466 U.S. at 414. Absent a traditional basis for jurisdiction (presence, domicile or consent), due process requires that the defendant have "certain minimum contacts with (the forum state) such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

B. Analysis

APL contends that St. Ventures fails to establish specific jurisdiction because APL does not have sufficient minimum contacts with the state of California.

The Ninth Circuit employs a three-prong test to determine whether a party has sufficient minimum contacts to be susceptible ...

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