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STARCK v. DEWANE

September 12, 1973

P.A. STARCK AND JANE STARCK, PLAINTIFFS,
v.
DONALD E. DEWANE AND WAYNE BROWN, DEFENDANTS.



The opinion of the court was delivered by: Bauer, District Judge.

MEMORANDUM OPINION AND ORDER

This cause comes on the defendants' motion to dismiss the complaint for lack of jurisdiction.

This is an action to redress an alleged violation of Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5). More specifically, the plaintiff alleges in Count I of the complaint that the defendants made false and misleading representations in the offer and sale of a security. Jurisdiction is based on Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. § 78aa). The plaintiffs, in Counts II and III of the complaint also claim respectively that the defendants committed a common law tort of fraud and violated the Illinois Consumer Fraud Act, Chapter 121 1/2, § 262A of the Illinois Revised Statutes.

The defendants in support of their motion to dismiss for lack of jurisdiction contend:

  1.  Neither defendant Donald E. Dewane or Wayne
      Brown used the mails and/or other means of
      interstate commerce in regard to any of the
      allegations of Count I of the plaintiff's
      complaint and thereby this Court lacks
      jurisdiction under Section 27 of the
      Securities Act of 1934 (15 U.S.C. § 78aa).
  2.  There is no pendent jurisdiction before this
      Court as alleged in both Counts II and III of
      plaintiff's complaint as the Court lacks
      jurisdiction over any federal question or
      matter herein.

The plaintiffs in opposition to the instant motion contend that Donald E. Dewane used the telephone to arrange meetings with the plaintiffs regarding the sale of the House of Health, Inc. common shares; and also that the collection of the checks used to purchase the shares involved the use of the mails. In support of this contention the plaintiffs have submitted the affidavits of P.A. Starck, Jane Starck and Karen Wascher.

Plaintiff P.A. Starck, in his affidavit, states, in relevant part:

    2. That on or about September 3, 1971, he had a
  meeting with Donald E. Dewane, one of the
  defendants in the above entitled case; that the
  meeting took place at the affiant's home located
  at 8909 McConnell Road, Woodstock, Illinois; that
  the only other person at the meeting was
  affiant's wife, Jane Starck; and that at the
  meeting he purchased stock in a business known as
  the House of Health, Inc. from Donald E. Dewane,
  the President of the Corporation.
    3. That the date for the meeting on or about
  September 3, 1971, was set by Donald E. Dewane
  during a telephone call affiant had received from
  the said Dewane on or about August 29, 1971.
    4. That during the period of on or about March
  10, 1971 to on or about September 3, 1971,
  several other telephone calls were received by
  affiant from Donald E. Dewane concerning the
  purchase of stock in House of Health, Inc.
    5. During the meeting of on or about September
  3, 1971 the affiant delivered to Donald E. Dewane
  a check dated September 3, 1971 for $15,000
  payable to House of Health, Inc. for the purchase
  of 100 shares of House of Health, Inc. common
  stock.
    6. That the check attached to this affidavit
  and marked as Exhibit A is a true and correct
  copy of the check he delivered to Donald E.
  Dewane on September 3, 1971. The check when he
  received it back in the mails with his bank
  statement was in the same condition as when he
  gave it to Donald E. Dewane except the front side
  had a paid stamp on it and the reverse side of
  the check bore the written endorsements of House
  of Health, Inc., Donald E. Dewane as well as
  various stamped endorsements including

  one ...

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