JAMES R. ZAZZALI, Plaintiff,
ALEXANDER PARTNERS, LLC, et al., Defendants.
GREGORY M. SHEET, District Judge.
On June 27, 2012, the plaintiff, James R. Zazzali ("Zazzali"), Trustee of the Diversified Business Services & Investments, Inc. ("DBSI") Private Actions Trust (the "PAT"), filed this suit against over 200 named defendants and 500 "John Doe" defendants. (D.I. 1.) The 245-paragraph Complaint alleges (1) violations of § 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and SEC Rule 10b-5, (2) violations of§ 20(a) of the Exchange Act, (3) breaches of contract, (4) common law fraud, (5) negligence, and (6) breaches of fiduciary duties. ( Id. )
Several defendants have filed motions to dismiss for lack of personal jurisdiction and/or improper venue under Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedure. Zazzali consolidated his response to these motions in a single answering brief. (D.I. 313.) For the reasons that follow, the court will deny the motions with respect to the arguments made pursuant to Rules 12(b)(2) and 12(b)(3). The court will also deny as moot what it views as a motion by defendants Daniel Berckes, Sue Desrosier, and Syd Widga to join in the 12(b)(2) and 12(b)(3) motions of various Moving Defendants. (D.I. 384.)
This action stems, in part, from the November 2008 bankruptcy filing of ninety-three Diversified Business Services & Investments, Inc. ("DBSI") entities. (D.I. 1 at ¶ 9.) On September 11, 2009, the bankruptcy court approved the appointment of Zazzali as the Chapter 11 Trustee for the DBSI entities. ( Id. at ¶ 10.) On October 26, 2010, the bankruptcy court issued its Findings of Fact, Conclusions of Law and Order Confirming Second Amended Joint Chapter 11 Plan of Liquidation. ( Id. at ¶ 12.) Zazzali serves as trustee for two of the four trusts - the PAT and the Estate Litigation Trust - that were formed pursuant to this confirmation order. ( Id. at ¶ 13.)
The Second Amended Joint Chapter 11 Plan of Liquidation created the PAT to hold certain causes of actions assigned by creditors and equity holders of DBSI. ( Id. at ¶ 14.) One category of claims held by the PAT are claims against "securities brokers/dealers" that provided services to DBSI. ( Id. at ¶ 14 n.5.) In general terms, Zazzali claims that certain members of the PAT acquired securities in the DBSI entities from one or more of the defendants named in this action. He alleges that the defendants were securities brokers, the registered representatives of brokers, or control persons of brokers that facilitated the sale of DBSI securities in what eventually turned out to be a classic "Ponzi scheme." ( Id. at ¶ 2, 21.)
III. STANDARD OF REVIEW
A. Rule 12(b)(2)
Rule 12(b)(2) requires that the court dismiss a case when it lacks personal jurisdiction over the defendant. Fed.R.Civ.P. 12(b)(2). Determining personal jurisdiction involves a two-part analysis. First, the court applies the long-arm statute of the state in which it is located. See Intel Corp. v. Broadcom Corp., 167 F.Supp.2d 692, 700 (D. Del. 2001). The court then must ask whether exercising jurisdiction over the defendant in this state comports with the dictates of due process. See id. That requirement is met when the court detects sufficient "minimum contacts" between the non-resident defendant and 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) (internal quotation marks omitted); see also Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 368-69 (3d Cir. 2002).
In resolving a motion under Rule 12(b)(2), the court must accept as true the allegations in the complaint. Altech Indus., Inc. v. Al Tech Specialty Steel Corp., 542 F.Supp. 53, 55 (D. Del. 1982). The plaintiff, however, bears the burden of alleging facts sufficient to make a prima facie showing of personal jurisdiction over the movant. JCT Pharms., Inc. v. Boehringer lngelheim Pharms., Inc., 147 F.Supp.2d 268, 270-71 (D. Del. 2001). To meet this burden, the plaintiff must offer facts which "establish with reasonable particularity" that jurisdiction exists. Id.
B. Rule 12(b)(3)
Rule 12(b)(3) permits a defendant to move to dismiss a case for improper venue. Fed.R.Civ.P. 12(b)(3). In deciding a motion brought under this rule, the court accepts as true all allegations in the complaint unless those allegations are contradicted by affidavits from the defendant. See Bockman v. First Am. Mktg. Corp., 459 F.App'x 157, 158 n.1 (3d Cir. 2012). The movant bears the burden of demonstrating that venue is improper. See id. at 160; Am. High-Income Trust v. AlliedSignal Inc., No. 00-690-GMS, 2002 WL 373473, at *2 (D. Del. Mar. 7, 2002).
A. Rule 12(b)(2)
Zazzali pleads personal jurisdiction under § 27 of the Securities Exchange Act of 1934, which provides:
The district courts of the United States... shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations, 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.
Securities Exchange Act of 1934, Pub. L. No. 73-291, § 27, 48 Stat. 881, 902-03 (codified as amended at 15 U.S.C. § 78aa). This statute allows for nationwide service of process, and "[t]hus, so long as the defendant has minimum contacts with the United States... the Exchange Act confers personal jurisdiction over the defendant in any federal court.'" FS Photo, Inc. v. Picture Vision, Inc., 48 F.Supp.2d 442, 445 (D. Del. 1999) (quoting Secs. ...