United States District Court, S.D. Ohio, Western Division, Dayton
H. Rice, District Judge.
REPORT AND RECOMMENDATIONS
L. Ovington United States Magistrate Judge.
American Power, LLC brings this action seeking to impose
liability on Defendants Michael T. Morley, Scott Larson, and
others for purported violations of the Securities Exchange
Act of 1934 and state common law. The case is presently
before the Court upon Morley's and Larson's Motions
to Dismiss (Doc. #s 21, 22), Plaintiff's Memoranda in
Opposition (Doc. #s 34, 35), and the record as a whole.
Morley and Larson contend that this Court lacks personal
jurisdiction over them under Ohio's long-arm statute and
the Fourteenth Amendment's Due Process Clause. Plaintiff
asserts that this Court has personal jurisdiction over
Defendants under 15 U.S.C. § 78aa.
Complaint alleges the following basic information about
Defendants Morley and Larson. Morley is a Member-Manager of
two other Defendants-Dektrix LLC and Dektrix Transportation
Services LLC (Dektrix Transportation). Morley's personal
residence is in Spanish Fork, Utah. He is a citizen of Utah.
(Doc. #1, ¶ 16). Defendant Larson is the Comptroller,
employee, and/or agent of Dektrix LLC and Dektrix
Transportation. Larson's personal residence is in
Midvale, Utah. He is a citizen of Utah. Id. at
principal office apparently shared by Dektrix LLC and Dektrix
Transportation is in Salt Lake City, Utah. Dektrix LLC is
incorporated in the State of Nevada; Dektrix Transportation
is incorporated in the State of Utah. Id. at ¶s
has the burden to establish that this Court may exercise
personal jurisdiction over “each Defendant
independently.” Days Inns Worldwide, Inc. v.
Patel, 445 F.3d 899, 904 (6th Cir. 2006) (citing
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475,
105 S.Ct. 2174 (1985)); see CompuServe, Inc. v.
Patterson, 89 F.3d 1257, 1261-62 (6th Cir. 1996). No.
evidentiary hearing was held on Defendants Morley's and
Larson's Motions and, as a result, Plaintiff “need
only make a prima facie showing of jurisdiction.”
Patterson, 89 F.3d 1262; see Neogen Corp. v. Neo
Gen Screening, Inc., 282 F.3d 883, 887 (6th 2002).
“Under these circumstances, th[e] court will not
consider facts proffered by the defendant that conflict with
those offered by the plaintiff and will construe the facts in
the light most favorable to the nonmoving party [here,
Plaintiff]….” Neogen Corp., 282 F.3d at
887 (internal citation omitted); see Beydoun v. Wataniya
Restaurants Holding, Q.S.C., 768 F.3d 499, 504 (6th Cir.
Morley and Larson mistakenly rely on Ohio's long-arm
statute and the Fourteenth Amendment's Due Process Clause
because Plaintiff's Complaint asserts that they violated
§§ 10(b) and 20(a) of the Securities Exchange Act
and accompanying Rules. (Doc. #1, PageID #s 24-28).
“Nationwide service of process is available under
Section 78aa of the Securities Exchange Act, which
‘confers personal jurisdiction in any federal district
court over any defendant with minimum contacts to the United
States.'” Zobel v. Contech Enters., 170
F.Supp.3d 1041, 1045 (S.D. Ohio 2016) (quoting United
Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1330 (6th
Cir. 1993)). Plaintiff's Complaint sufficiently alleges
that both Morley and Larson reside in Utah and both are
citizens of the State of Utah. They, therefore, have minimum
contacts with the United States, triggering this Court's
proper exercise of personal jurisdiction over them. See
Morley also maintains that Plaintiff's claims against him
should be dismissed for failing to state claims against him
that satisfy Fed.R.Civ.P. 8, 12(b)(6), and 9(b). He
incorporates by reference the arguments and authorities
pressed by Dektrix LLC and the other Dektrix Defendants in
their separately filed Motion to Dismiss. He also argues:
Plaintiff's conclusory and group-pled allegations that
the individual Defendants ‘acted as controlling persons
for Dektrix' ([Doc. #1, ] ¶ 86) are belied by
detailed factual allegations to the contrary. Specifically,
the MPA [Membership Purchase Agreement] which Plaintiff
incorporated into the Complaint clearly states that only
Defendants Harris and Crane are managing members of Dektrix
LLC. See Doc. 1-1, p. 89-114 at p. 97. And there is no
allegation supporting any reason to believe otherwise.
Certainly there is no factual allegation supporting
Plaintiff's conclusory allegation.
(Doc. #21, PageID # 286) (footnote added). These
contentions lack merit.
as true the factual allegations raised in Plaintiff's
Complaint and construing it “in the light most
favorable to Plaintiff…, ” Doshi v. General
Cable Corporation, 823 F.3d 1032, 1039 (6th
Cir. 2016); see Frank v. Dana Corp., 646 F.3d 954,
958 (6th Cir. 2011), reveals repeated allegations that
Defendant Morley is a member-manager of Dektrix LLC and
Dektrix Transportation. See Doc. #1, ¶s 8, 16,
18. Dektrix LLC's Private Placement Memorandum attached
to the Complaint provides details about Morley's
management role and authority. It states:
Management The Company [Dektrix LLC] is managed by a Board of
Managers (the ‘Board'). As of the
dates of this Memorandum, the Board is comprised of Murray J.