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Chabert v. Bujaldon

United States District Court, D. North Dakota

November 1, 2017

Raymond Chabert, et. al., Plaintiffs,
v.
Michael Francois Bujaldon, VM Invest LLC, Big3 Property LLC, and JMIIMMO Invest LLC Defendants.

          ORDER DENYING DEFENDANT BIG3 PROPERTY, LLC'S MOTION TO DISMISS AMENDED COMPLAINT FOR LACK OF PERSONAL JURISDICTION

          DANIEL L. HOVLAND DANIEL L. HOVLAND, CHIEF JUDGE UNITED STATES DISTRICT COURT

         Before the Court is "Defendant Big3 Property, LLC's Motion to Dismiss Amended Complaint for Lack of Personal Jurisdiction and Request for Oral Argument" filed on February 3, 2017. See Docket No. 63. For the reasons set forth below, the motion is denied.

         I. BACKGROUND

         The Plaintiffs filed this action in the wake of proceedings filed against North Dakota Developments, LLC ("NDD"), Robert Gavin, Daniel Hogan, and relief Defendants by the United States Securities and Exchange Commission, alleging NDD, Gavin, and Hogan fraudulently raised more than $62 million from investors through the sale of interests in North Dakota man camps. See Case No. 4:15-cv-053 (D.N.D. May 5, 2015). In their amended complaint, the Plaintiffs allege Michael Francois Bujaldon; VM Invest, LLC; JMI IMMO Invest, LLC; and Big3 Property, LLC (collectively referred to as "Defendants") actively assisted NDD in offering and selling, unregistered, nonexempt, and fraudulent securities from May 2012 to April 2015. See Docket No. 61, p. 1. Specifically, the Plaintiffs allege claims against Defendants for violations of Section 12(a)(2) of the Securities Act of 1933 (15 U.S.C. § 771(a)(2)) as well as violations of N.D.C.C. § 10-04-17 by offering and selling unregistered securities and selling securities as an unlicensed agent.

         In their amended complaint, the Plaintiffs allege the Defendants communicated with North Dakota-based agents of NDD, traveled to North Dakota to meet with NDD, urged investors to purchase "North Dakota-issued securities, " directed NDD investors to send paperwork related to their investment to agents of NDD who were located in North Dakota, and received sales commissions from investor funds wired to North Dakota. See Docket No. 61, pp. 3-4. Further, the Plaintiffs specifically allege this Court has jurisdiction over all Defendants because they

actively recruited investors to invest in a North Dakota company; brokered the sale of interests in North Dakota real property and of North Dakota-issued securities; received fraudulent offering documents from North Dakota and directed communications to North Dakota, pertaining to their fraudulent sales of NDD securities; received commissions from North Dakota in connection with their sales; directed investor funds and investment-related paperwork to be sent to a North Dakota law firm in connection with the sales; and, acted as a necessary intermediary in connection with a fraud emanating from North Dakota.

See Docket No. 61, p. 5. According to the amended complaint, the Defendant Big3 Property, LLC ("Big3 Property") is a Michigan limited liability company with its principal place of business in Detroit, Michigan, with Defendant Bujaldon as a member. Id. at p. 9. Bujaldon "conducted extensive business and engaged in numerous communications with North Dakota entities, and traveled to North Dakota, in connection with his sale of NDD securities to Plaintiffs and others." Id. at p. 8.

         In response to the Plaintiffs amended complaint, Big3 Property filed a motion to dismiss for lack of personal jurisdiction. See Docket No. 63. In its brief in support of its motion, Big3 Property contends it has had no contact with North Dakota and any action of Bujaldon relating to the sale or solicitation of the unregistered, fraudulent securities on behalf of NDD was outside the scope of Bujaldon's agency with Big3 Property.

         II. LEGAL DISCUSSION

         A. RULE 12(b)(2)

         In its memorandum in support of its motion to dismiss, Big3 Property contends the Court lacks personal jurisdiction over it and the claims against Big3 Property should be dismissed pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. To defeat a motion to dismiss for lack of personal jurisdiction, the Plaintiffs need only establish a prima facie showing of personal jurisdiction over Big3 Property. Epps v. Stewart Info. Servs. Corp., 327 F.3d 642, 647 (8th Cir. 2003). The Plaintiffs' prima facie showing is analyzed "not by the pleadings alone, but by the affidavits and exhibits presented with the motions and in opposition thereto." Dever v. Hentzen Coatings. Inc.. 380 F.3d 1070, 1072 (8th Cir. 2004). The party seeking to establish that a court has in personam jurisdiction carries the burden of proof, and the burden does not shift to the party challenging jurisdiction. Epps, 327 F.3d at 647.

         This Court may properly exercise personal jurisdiction over a party if a two-step inquiry is satisfied. First, the party must be "amenable to service of process under the appropriate long-arm statute." Int'l Shoe Co. v. Washington. 326 U.S. 310. 316 (1945). Second, the party challenging personal jurisdiction must have engaged in activities which satisfy the minimum contacts requirement of the Due Process Clause. Id. The jurisdiction of North Dakota courts is governed by the North Dakota long-arm statute set forth in Rule 4(b)(2) of the North Dakota Rules of Civil Procedure. The North Dakota Supreme Court has held that Rule 4(b)(2) "authorizes North Dakota courts to exercise jurisdiction over nonresident defendants to the fullest extent permitted by due process." Hansen v. Scott, 2002 ND 101, ¶ 16, 645 N.W.2d 223. The Eighth Circuit Court of Appeals has held that when a state construes its long-arm statute to grant jurisdiction to the fullest extent permitted by the Constitution, the Court must determine whether the exercise of personal jurisdiction comports with due process. Johnson v. Woodcock, 444 F.3d 953, 955 (8th Cir. 2006).

         "Due Process requires 'minimum contacts' between [a] non-resident defendant and the forum state such that 'maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Dever, 380 F.3d at 1073 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92 (1980). A non-resident defendant's contacts with a forum state, for example, must be sufficient to cause the defendant to "reasonably anticipate being haled into court there." Epps, 327 F.3d at 648. There are two categories of minimum contacts with a state that may subject a defendant to jurisdiction in that forum: general jurisdiction and specific jurisdiction. With respect to general personal jurisdiction over a defendant, "a defendant may be subject to the forum state's exercise of personal jurisdiction if contacts with the state are continuous and systematic." Id. A state has specific personal jurisdiction over a defendant when the suit arises out of, or is related to, the defendant's contacts with the forum state. Johnson, 444 F.3d at 956.

         The Eighth Circuit has established a five-factor test for measuring minimum contacts for purposes of asserting ...


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