United States District Court, District of Columbia
January 30, 2001
DONALD L. POLING, PLAINTIFF,
RHONDA M. FARRAH, DEFENDANT
The opinion of the court was delivered by: Paul L. Friedman, District Judge.
MEMORANDUM OPINION AND ORDER
This matter is before the Court on defendant's motion to dismiss for
personal jurisdiction and improper venue. Plaintiff opposes the motion,
arguing that the Court does have personal jurisdiction over the
defendant. The Court agrees with plaintiff and therefore denies
Plaintiff Donald Poling, a District of Columbia resident with his place
of business in Maryland, seeks recovery from defendant Rhonda M. Farrah
based on Ms. Farrah's alleged violations of the federal and District of
Columbia securities laws, breach of contract, intentional and negligent
misrepresentation, negligence, conversion and breach of fiduciary duty.
At the time the events leading to these claims allegedly took place, Ms.
Farrah was a resident of Connecticut. She currently resides in
California. According to Mr. Poling, he entered into a joint venture
agreement with Ms. Farrah on October 25, 1994, believing that she was a
program manager trading in bank instruments. See Complaint, Attachment,
Joint Venture Agreement. The next day, he wired $100,000 to defendant's
bank account in Pittsburgh, Pennsylvania, with the understanding that
Ms. Farrah would invest the money beginning in late November 1994. See
id., Attachment, Receipt of Wire Transfer. Despite their agreement and
Mr. Poling's subsequent inquiries, Ms. Farrah did not invest his money as
promised and his attempts to encourage her to do so were unsuccessful.
Around August 1995, Mr. Poling was no longer able to contact or locate
Ms. Farrah or his money. On November 15, 1999, he filed suit.
A. Jurisdiction Under the Securities Exchange Act
Counts I and II of the complaint are based on defendant's alleged
violations of the Securities Exchange Act of 1934. Jurisdiction in such
suits is based on Section 27 of the Act 15 U.S.C. § 78aa, which
provides for nationwide service of process. Section 27 provides in
Any suit or action to enforce any liability or duty
created by this chapter or rules or regulations
thereunder . . . may be brought in any such district
or in the district wherein the defendant is found or
is an inhabitant or transacts business, and process in
such cases may be served in any other district of
which the defendant is an inhabitant or wherever the
defendant may be found.
15 U.S.C. § 78aa. Although the D.C. Circuit has not dealt directly
with this issue, other circuits have concluded that because Section 27
provides for nationwide service of process, it also "confers personal
jurisdiction in any federal district court over any defendant with
minimum contacts to the United States." United Liberty Life Insurance
Co. v. Ryan, 985 F.2d 1320, 1330 (6th Cir. 1993); see also In re Federal
Fountain, Inc., 165 F.3d 600, 602 (8th Cir. 1999); Trust Company of
Louisiana v. N.N.P., Inc., 104 F.3d 1478, 1486-87 (5th Cir. 1997);
Kidder, Peabody & Co. v. Maxus Energy Corp., 925 F.2d 556, 562 (2d Cir.
1991); 4 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND
PROCEDURE § 1067.1 (2d ed. 1987). Under this analysis, the Court
would have jurisdiction over Ms. Farrah because currently and at all
times relevant to this complaint, she has resided and transacted business
within the United States, either in Connecticut or in California, and she
therefore has minimum contacts with the United States.
In its recent decision in GTE New Media Services, Inc. v. BellSouth
Corp., 199 F.3d 1343, 1350-51 (D.C.Cir. 2000), however, the D.C. Circuit
cast some doubt on this analysis. In GTE, the court considered whether
Section 12 of the Clayton Act, 15 U.S.C. § 22, which contains
language similar to (although not identical with) the language of Section
27 of the Securities Exchange Act, allows a court to exercise nationwide
over a defendant. Section 12 of the Clayton Act provides:
Any suit, action, or proceeding under the antitrust
laws against a corporation may be brought not only in
the judicial district whereof it is an inhabitant, but
also in any district wherein it may be found or
transacts business; and all process in such cases may
be served in the district of which it is an
inhabitant, or wherever it may be found.
15 U.S.C. § 22. In construing the service of process provision, the
court of appeals rejected an interpretation that would allow a court to
exercise nationwide personal jurisdiction. See GTE New Media Sem., Inc.
v. BellSouth Corp., 199 F.3d at 1350. Instead, the court concluded that
the venue provision (the phrase before the semicolon) modified and
limited the reach of the service of process provision (the phrase after
the semicolon). See id. at 1350-51. The court therefore held that in
suits brought under the Clayton Act, a court has personal jurisdiction
over a defendant only if one of the requisites for venue contained within
the venue provision — that the defendant either be an inhabitant of
or have transacted business in the district where the suit is brought
— has been met.
Although the D.C. Circuit was analyzing the Clayton Act and not the
Securities Exchange Act, the two provisions are sufficiently similar that
this Court thinks it prudent to follow the Circuit's analysis. Applying
the reasoning of GTE, it concludes that the service of process provision
of Section 27 by itself cannot give the Court personal jurisdiction over
Ms. Farrah, because that provision necessarily is limited by the
requirements of the venue provision contained within Section 27. Because
the special venue provision of Section 27 of the Securities Act differs
from the venue provision of Section 12 of the Clayton Act, however, it
does not follow from GTE that the Court does not have personal
jurisdiction over the defendant in this case. The specific language of
the venue provision of Section 27 must be considered.
Under Section 27, venue is proper "in any such district or in the
district wherein the defendant is found or is an inhabitant or transacts
business." 15 U.S.C. § 78aa (emphasis added). The phrase "any such
district" refers to the preceding sentence in the section, which provides
that criminal proceedings "may be brought in the district wherein any act
or transaction constituting the violation occurred." 15 U.S.C. § 78aa;
see Investors Funding Corp. v. Jones, 495 F.2d 1000, 1002-03 (D.C.Cir.
1974); Securities and Exchange Comm'n. v. Wallace, 94 F. Supp.2d 1, 2
(D.D.C. 2000). The Court therefore has personal jurisdiction over Ms.
Farrah in this civil action under Section 27 if this district is one in
which "any act or transaction constituting the violation occurred," even
if Ms. Farrah is not an inhabitant of this district and did not transact
any business here. As Judge Leventhal put it:
Thus, by the terms of this section a civil suit may be
brought not only in any district where the defendant
is found, or is an inhabitant or transacts business,
none of which apply here, but also in that district in
which a criminal proceeding, based upon the same
illegal conduct, could be brought.
Investors Funding Corp. v. Jones, 495 F.2d at 1002 (footnote omitted).
The Court concludes that it has jurisdiction over Ms. Farrah because
some of her actions that are acts or transactions constituting the
alleged violation occurred in the District of Columbia within the meaning
of Section 27. According to Mr. Poling, Ms. Farrah made several telephone
calls to him while he was at his residence in the District of Columbia.
Under Section 27, courts consistently have held that telephone calls made
into a district and other similar contacts are sufficient acts or
transactions to establish venue and hence personal jurisdiction. See
Bourassa v. Desrochers, 938 F.2d 1056, 1057 (9th Cir. 1991); Greenwood
v. New Frontier Media,
Inc., 2000 WL 278086, at *6 (S.D.N Y March 14, 2000); see also Investors
Funding Corp. v. Jones, 495 F.2d at 1002 (venue proper in District of
Columbia when defendant failed to submit timely filing to federal agency
in the District); Securities and Exchange Comm'n. v. Wallace, 94 F.
Supp.2d at 2 (venue proper in District of Columbia when defendants failed
to register as investment advisers with federal agency in the District).
The fact that such telephone calls might not be enough to constitute
"transacting business" under the District of Columbia long-arm statute,
D.C.Code § 13-423, or to satisfy the specific "arising from" language
of that statute, is irrelevant.*fn1 The Court therefore concludes that
the Court has personal jurisdiction over Ms. Farrah under Section 27 and
that venue also is proper in this Court.
Because the Court has jurisdiction over Ms. Farrah with respect to
Counts I and II of the complaint, it may exercise supplemental
jurisdiction over the remaining counts under 28 U.S.C. § 1367 as
[U]nder the doctrine of pendent personal
jurisdiction, where a federal statute authorizes
nationwide service of process, and the federal and
state claims "derive from a common nucleus of
operative fact," the district court may assert
personal jurisdiction over the parties to the related
state law claims even if personal jurisdiction is not
IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049
, 1056-57 (2d Cir.
1993); see also Oetiker v. Jurid Werke, G.m.b.H., 556 F.2d 1, 4-5
(D.C.Cir. 1977); 4 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE AND PROCEDURE § 1069.2 (2d ed. Supp. 2000).*fn2
All of the
counts of the complaint relate to the same operative facts —
namely, Ms. Farrah's allegedly fraudulent investment scheme in which Mr.
Poling contributed $100,000. Moreover, the Court can perceive no hardship
to defendant in requiring that these additional counts be litigated in
the District of Columbia because she must come to this Court to defend
against the first two counts of the complaint. The Court concludes that
under the doctrine of supplemental personal jurisdiction, it may exercise
jurisdiction over Ms. Farrah with respect to counts III through IX of the
complaint. It therefore denies defendant's motion to dismiss for lack of
personal jurisdiction. Accordingly, it is hereby
ORDERED that defendant's motion to dismiss for lack of personal
jurisdiction and improper venue [24-1] is DENIED; and it is
FURTHER ORDERED that a meet and confer status conference is scheduled
for February 21, 2001 at 9:30 a.m. The parties shall file a joint report
in compliance with Local Civil Rule 16.3 on or before February 14, 2001.